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London Mining plc
1
18 March 2010
London Mining plc
(“The Company”)
Quoted on AIM (LOND LN) and Oslo (LOND NO)
Q4 and Preliminary Full Year Results for the year ended 31 December 2009
London Mining plc, the UK based developer of mines for the steel industry, presents its full year results for the year ended 31
December 2009.
2009 Highlights
Projects
• 25 year mining lease for Marampa, Sierra Leone received
• JORC compliant resources at Wadi Sawawin, Saudi Arabia and Isua, Greenland
• Feasibility study completed for Wadi Sawawin
• Attributable production of 136,500t from Chinese joint venture since acquisition Financials
• USD 44.5 million Chinese joint venture acquisition (effective 23 April 2009)
• AIM listing and placing of 37 million existing shares at GBP 74 million with over 30 new institutional investors
• Group consolidated cash of USD 205 million as at 31 December 2009
• Group loss from operations reduced to USD 28.6 million (2008: USD 36.8 million) reflecting first net earnings* from
China of USD 6.0 million. Appointments
• Senior technical team augmented *Net earnings = EBITDA
2010 Highlights
Projects
• JORC compliant resources at Marampa (tailings)
• Final approvals received and construction commenced at Marampa
• Prefeasibility study completed for Isua
• 951Mt JORC resource at Isua
• Discussions initiated with potential providers of funding and offtake at Wadi Sawawin Financial
• Restructuring of equity investment in DMC, South African coal, completed Appointments
• Deputy COO recruited
Resources
London Mining has now attained JORC compliance for all resources at its 3 assets for which we are operators.
Asset Ownership Measured Indicated Inferred Total
% Mt % Fe Mt % Fe Mt % Fe Mt % Fe
Marampa 100 - - 30 23 3 22 33 23
Wadi Sawawin 50 - - 157 41 73 40 230 41
Isua 100 - - 114 37 837 36 951 36
Total 301 38 913 36 1,214 37
London Mining is working closely with the operator of the Chinese joint venture to deliver a JORC resource.
London Mining plc
2
Graeme Hossie, Chief Executive Officer of London Mining commented:
“In 2009, we consolidated our assets and strengthened our technical and executive teams with high calibre appointments.
London Mining is now focussed on continued delivery against key milestones in 2010. We have a portfolio of quality iron ore
projects which are scalable, involve simple logistics and can be developed rapidly. We expect to deliver first production at the
Marampa project in Sierra Leone in the early part of 2011, with 1.5mtpa from the initial phase of the project and expanding
thereafter. We are progressing drilling and development work following the delivery of a bankable feasibility study at Wadi
Sawawin and a prefeasibility study at Isua.”
The full published accounts for the financial year ended 31 December 2009 will be posted to shareholders on, or before 1 April
2010 and will be available on the Company‟s website, www.londonmining.co.uk.
An analyst presentation on the full year results will start at 9.00am UK time on March 18 2010 at:
Liberum Capital Limited
City Point
10th
Floor
One Rope Maker Street
London EC2Y 9HT
For more information, please visit www.londonmining.co.uk or contact:
London Mining Plc
Graeme Hossie, Chief Executive Officer +44 20 7201 5000
Rachel Rhodes, Finance Director
Thomas Credland, Head of Investor Relations
Liberum Capital Limited (Nominated Advisor/Broker) +44 20 3100 2000
Clayton Bush/Ellen Francis
Brunswick Group
Carole Cable / Daniel Thöle
+44 20 7404 5959
Crux Kommunikasjon AS +47 97 56 19 59
Charlotte Knudsen
Notes to editors:
London Mining is focused on identifying, developing and operating scalable mines to become a mid-tier supplier to the global
steel industry. Its four principal iron ore assets in Sierra Leone, Saudi Arabia, Greenland and China all have deliverable
production with potential for expansion. The Company listed on the Oslo Axess on 9 October 2007 and on AIM in London on 6
November 2009. It trades under the symbols LOND.L and LOND.NO (Reuters) and LOND LN and LOND NO (Bloomberg).
Forward looking statements
This announcement contains certain forward looking statements which by nature, contain risk and uncertainty because they
relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those expressed or implied by these forward looking statements.
London Mining plc Chairman’s statement
3
London Mining achieved notable progress in 2009 from both a corporate perspective and on the ground at our key iron ore
projects in Sierra Leone, Saudi Arabia, Greenland and China. Advances made over the past year leave the business well
positioned to deliver on our stated strategy of becoming a mid-tier supplier to the global steel industry.
Of particular note during the year was the successful conclusion of the AIM listing. The associated placing of 37 million
existing shares in November resulted in the addition of over 30 new institutional shareholders to our register and a resulting free
float of approximately 70% of the issued shares, reflecting positively on our assets, the executive team and our corporate
strategy.
The people, policies and procedures we continued to put in place during the year under review provide a strong base for
London Mining to manage its growth. We aim to follow international best practice in our commitment to our employees, the
communities we work with and the environment by developing and implementing a Corporate Environment Health Safety and
Community (EHSC) policy. This is based on careful analysis and internationally recognised standards including the Equator
Principles.
Very important progress has been made at Marampa, Sierra Leone. London Mining was issued with a new 25 year mining
licence in August 2009 and in early 2010 was awarded all necessary approvals to commence construction. On 11 March 2010, a
national celebration attended by the President of Sierra Leone, his cabinet, parliamentarians and representatives of all 149
Paramount Chiefs, marked the commencement of major development works in full. This ceremony demonstrates the ongoing
support and commitment to both London Mining and the project by the Government and more broadly, the people of Sierra
Leone as a whole. Substantial work has been carried out on the licence, with extensive studies performed to confirm the
expected resource potential. Construction of the haul road to the proposed port loading facility is well advanced laying the
groundwork for first production in 2011 and for eventual expansion to over 5mtpa.
Also of note during the year was the Group‟s return to production following the acquisition, effective 23 April 2009, of a 50%
share in an operating iron ore mine in the People‟s Republic of China. Although currently a small operation, with capacity of
300,000 tonnes of iron ore concentrates this investment provides the Group with accelerated growth opportunities through local
regional consolidation. We expect to report more progress on this during 2010.
Our success has been based on the exceptional technical capability of our people. Investment in the right people is the
cornerstone of our strategy. Fundamental to the development of our projects is the capacity of our COO, Luciano Ramos and
his technical team. As the Group continues to expand, we have augmented the senior executives in our technical team since
year end, with the addition of a deputy COO and I would like to use this opportunity to welcome Felix Kayat to the team.
The strengthening of our technical team enables us to enter the critical development stages at our four principal projects as well
as enabling us to react quickly to other opportunities. The performance of Luciano‟s team is directly reflected in our delivery of
key milestones at all our projects: notably the establishment of JORC resources at our three projects which are operated by
London Mining; a bankable feasibility study at Wadi Sawawin; and a prefeasibility study at Isua.
Colin Knight
Chairman
London Mining plc Chief Executive Officer’s statement
4
If 2009 was a year of development for London Mining, we look forward to 2010 knowing that it is to be a year of delivery. We
have been able to move all our projects on significantly during the last 12 months despite the prevailing uncertainty in the
financial markets and London Mining is now extremely well placed to benefit from the continuing excellent fundamentals for
iron ore through the development of its 1.2 billion tonne resource base at its iron ore projects in Sierra Leone, Saudi Arabia,
Greenland and China.
We now have all the necessary approvals in place to develop fully the Marampa Project in Sierra Leone. In addition to
developing the tailings reprocessing operation, we expect to show Marampa‟s expansion potential through resource definition
of the primary ore body and the completion of a prefeasibility study on an operation in excess of 5mtpa by the end of the year.
The technical and economic parameters of Wadi Sawawin in Saudi Arabia and Isua in Greenland have now been defined with
both projects capable of producing 10mtpa each of high quality iron ore concentrates. We expect to have the results of an
optimised feasibility study for Wadi Sawawin together with sufficient resources to sustain a 20 year mine life for an initial
5mtpa operation by the end of Q2 2010. It is clear that the asset falls within a major iron ore province and we will work on
expanding resources by drilling outside of the current exploitation licence in the neighbouring exploration licences.
At Isua we now have almost 1 billion tonnes of resources reported to JORC standards, all of which fall within an enlarged open
pit shell. Isua is now being considered as an operation capable of producing 10mtpa of high grade, low impurity concentrate
suitable for use in either blast furnaces or HYL-type DRI plants.
We expect to be able to demonstrate both technical and financial viability to potential providers of offtake and financing for
Marampa, Wadi Sawawin and Isua during 2010. We will also continue to progress our interests in China, Chile, Colombia and
South Africa as well as looking at other opportunities in iron ore and metallurgical coal as they arise.
With proven assets, a technical team with broad expertise and a strong balance sheet with USD 205 million in Group cash at 31
December 2009, we intend to become an established company with some of the world‟s leading mining houses on the London
market.
Graeme Hossie
Chief Executive Officer
London Mining plc Operating and Financial Review
5
Project overview
1. Marampa, Sierra Leone (100% owned)
1.1 Operations
During 2009, having resolved the long standing dispute over the licence boundary at Marampa, London Mining was issued with
a new 25 year mining lease incorporating the Masaboin Hill and Ghafal primary ore bodies as well as areas containing
historical tailings. The Company also negotiated a package of fiscal incentives which were approved, along with environmental
permits and the mine plan (together the “Mining Licence Agreement” or “MLA”) by the Government of Sierra Leone in
December 2009. The MLA was ratified by the Sierra Leone Parliament in February 2010, receiving unanimous cross-party
support, and gives London Mining a clear mandate to proceed with development of Marampa.
The construction of the initial 1.5mtpa tailings operation has now begun, a project manager engaged and the haul road is more
than 80% complete. Start-up is scheduled for Q1 2011 with first shipment of iron ore concentrate expected in Q2 2011.
In January 2010, London Mining reported that it had confirmed to JORC standard sufficient tailings resources to commence
development of the 1.5mtpa operation and had appointed Ausenco to oversee project management. The tailings operation will
produce 1.5mtpa of iron ore concentrate with a grade of 66% Fe and suitable for use as sinter feed.
The logistics are straight forward with simple technology. Concentrate is trucked 40km to a barge loading jetty at Tawfayim,
from where it is barged 60km to a deepwater, floating crane for loading onto panamax or capesize ships. The Company is
entering final discussions with Louis Dreyfus Armateurs S.A.S (Louis Dreyfus), an international logistics provider, to provide
the barging and transshipment solution for up to 5mtpa of concentrate. Louis Dreyfus has confirmed the scalability of this
solution to up to 10mtpa or more, by adding the additional barges and a second floating crane.
The 18.7km gravel haul road from mine to the barge loading jetty at Tawfayim is over 80% complete, with all the major
structures in place ahead of the wet season which begins in April. The major long lead item for the plant, namely the Wet High
Intensity Magnetic Separation (WHIMS) plant is expected to be ordered in April 2010.
The next phase of development at Marampa will be to produce concentrate from the open pit mining of the primary ore body.
Ausenco was appointed in January 2010 to complete a technical study, the results of which will contribute to a prefeasibility
study (PFS). The PFS will look to confirm expansion potential for a 5 to 8mtpa operation, and it is expected to be completed in
H2 2010. An extensive resource definition programme is ongoing and will form the basis of the expansion plans.
1.2 Geology and resource estimation
The Company embarked on a comprehensive resource definition program in 2009 with the aim of confirming that there were
sufficient resources in place to commence with a tailings reprocessing operation and to define the size of the main primary ore
body. 3,944m of drilling was completed on the tailings in 2009 and all additional drilling is now complete. Work in 2010 will
focus on completing the delineation of the main primary Ghafal and Masaboin Hill ore bodies, confirming the resource
potential of additional satellite deposits on the licence and upgrading further resources to the measured and indicated categories.
4,074m of diamond drilling was completed on the primary ore bodies in 2009 with 18,000m planned for 2010. 3,447m of this
program has now been completed.
London Mining plans to report an updated tailings resource and preliminary estimate for the primary ore at the end of Q1 2010.
An updated resource statement and mine plan for the primary ore is expected in Q3 2010 with an estimate of further satellite
deposit potential by the end of 2010.
Marampa JORC resource (January 31 2010)
Asset Ownership Measured Indicated Inferred Total
% Mt % Fe Mt % Fe Mt % Fe Mt % Fe
Marampa (Tailings) 100 - - 30 23 3 22 33 23
London Mining plc Operating and Financial Review (continued)
6
1.3 Appointments
In March 2009, a new Managing Director of the London Mining Company, Sierra Leone was appointed. Over 2009 the
Company made the following high calibre appointments to support the development of Marampa including a Human Resource
Manager, a Community Relations Officer, a Procurement Officer and a Project Engineer.
2. Wadi Sawawin, Saudi Arabia (50% owned)
2.1 Operations
The Wadi Sawawin project advanced significantly in 2009 with a bankable feasibility study completed and submitted to our
Saudi partners, National Mining Company (NMC), and the Saudi government in December 2009. Work continues to expand
the resource and extend mine life and further optimise capital expenditure.
The results of an engineering cost study were reported in February 2009 and confirmed to London Mining and its partner the
viability of the Wadi Sawawin Project. The London Mining project team identified engineering alternatives that presented
opportunities for capex saving for investigation during the next phase, a bankable feasibility study with a project valuation
accuracy of +/- 15%, which was undertaken by Worley Parsons Mining & Minerals Division in Perth. The engineering
alternatives included relocation of the process plant from the mine to the coast area and consideration of a deep water port
rather than a transhipment facility. Relocation of the plant eliminated 60km of pipelines for water and slurry as well as negating
the need to pump water uphill from the desalination plant to the mine.
The BFS was completed on 15 December 2009 on the basis of a production capacity of 5mtpa DRI Pellet for a 14 year mine
life. On 16 December 2009 London Mining and NMC presented to the Deputy Ministry for Mineral Resources in Jeddah. The
BFS assumes capex of USD 1.6 billion and opex of USD 58/t pellets (assuming power and water are purchased from a third
party) or capex of USD 2 0 billion and operating costs of USD 47/t if a power and desalination plant is included in the project.
During Q2 2010, London Mining will complete further drilling and resource verification with the expectation that the BFS will
be revised to support an increase to a 20 year mine life at 5mtpa capacity. The current schedule assumes a final feasibility study
to be in place in early Q2 2010 and financing secured by the end of 2010. This would allow for construction to commence in
H1 2011 with an expected start-up in H2 2013.
London Mining and NMC are currently in detailed discussions with the Saudi Bin Laden group regarding forming a joint
venture arrangement, which will build, fund and operate the Wadi Sawawin project in exchange for offtake and an equity
interest.
2.2 Geology and resource estimation
A JORC resource of 230Mt (resources stated on 100% basis) grading 41% Fe at a cut-off of 30% was reported in December
2009. 157Mt grading 41% Fe was included in the indicated category and provides sufficient resources for a 14 year mine life.
Drilling, sampling and testing continue to upgrade additional resources to a category sufficient to be included in mine planning
and to pin point any variability in the ore bodies which may require adjustment to the process. 55 holes comprising 4,458m
were drilled in 2009 with a further 80 holes comprising 8,000m planned for 2010 of which 3,000m will target areas outside the
current exploitation licence in the neighbouring exploration licences. All the current resources are currently contained within
this exploitation licence of 3.5km2. A further 211.2km
2 are held under exploration licences which will be explored in the next
phase of drilling with the aim of identifying sufficient resources to increase production to 10mtpa.
Asset Ownership Measured Indicated Inferred Total
% Mt % Fe Mt % Fe Mt % Fe Mt % Fe
Wadi Sawawin 50 - - 157 41 73 40 230 41
London Mining plc Operating and Financial Review (continued)
7
2.3 Appointments
The project team was strengthened by the appointment of a Contracts Manager, a Procurement & Project Controls Manager and
an Engineering Manager & Deputy Project Director. These appointments are important for the timely delivery of the BFS with
an improved configuration and will ensure a smooth transition into the construction phase of the Wadi Sawawin Project. All
three appointments have extensive experience on similar scale projects in the Middle East.
3. Isua, Greenland (100% owned)
3.1 Operations
The Isua iron ore project in Greenland advanced in 2009 with work culminating in the submission of a prefeasibility study in
February 2010.
In September 2009, a prefeasibility engineering study was started by SNC Lavalin International to investigate more economical
alternative project concepts, to improve the accuracy of capex and opex estimates and to integrate new site information
obtained during 2009 geotechnical investigations. This work was completed on schedule at the end of January 2010 and it was
determined that the project could be built for estimated capex of USD 1.74 billion (+/- 25%), complete with all the supporting
facilities necessary to produce 5mtpa of 70.8% iron ore concentrate. It was shown that a 23 year life-of-mine project can be
operated at an average annual cost of USD 37/t.
A desk top scoping study has also been completed which shows that the economics of the Isua project are greatly improved if a
10mtpa operation is considered producing a high grade, low impurity, blast furnace pellet feed concentrate that can also feed
HYL-type DRI plants. If the operation is increased from 5mtpa to 10mtpa, the operating cost could be reduced to USD 27/t
with estimated capex of USD 2.39 billion. London Mining plans to undertake a prefeasibility study on this enlarged operation
and expects it to be completed during Q2 2010.
3.2 Geology and resource estimation
3,859 meters of drilling was completed on the Isua ore body in 2009. In June 2009, a preliminary open pit resource estimate
was completed by Snowden to JORC standards, declaring 507Mt of inferred resource grading 35% Fe, with a cut-off grade of
20%. In December 2009 an updated JORC-compliant resource statement was released, in recognition of additional drilling and
metallurgical testing work done this year. The new resource statement determined that the Isua mineral deposit contains 574Mt
grading 37% Fe, consisting of 114Mt of indicated resource and 460Mt of inferred resource, with a cut-off grade of 20%. This
resource was further increased to 951Mt following the inclusion of a further 377Mt of inferred resources within an optimised
pit shell using the same cut-off.
Asset Ownership Measured Indicated Inferred Total
% Mt % Fe Mt % Fe Mt % Fe Mt % Fe
Isua (open pit) 100 - - 114 37 837 36 951 36
24 drill holes are planned at Isua in 2010 for a total length of approximately 12,100 m. The primary objective is to upgrade the
inferred resource for a 20 year pit with 10 mtpa operation but some work will also be undertaken on areas outside the pit.
3.3 Appointments
In 2009, London Mining appointed a number of key personnel at Isua including a cold region engineering specialist as Project
Director and a Communications Manager.
London Mining plc Operating and Financial Review (continued)
8
4. China Global Mining Resources JV (CGMR) (50% owned)
4.1 Operations
London Mining acquired a 50% stake in China Global Mining Resources (CGMR) in April 2009. On that date, CGMR in turn
acquired the producing Xiaonanshan iron ore open pit mine (XNS) and Sudan concentrate processing plant. CGMR holds a
licence incorporating two further adjacent operating mines (Sanbanqaio and Guqaio) and is undertaking a programme of
resource definition and mine planning to consolidate the three mines into a single operation. CGMR signed an MOU to acquire
the neighbouring mines in August 2009, completion of such acquisition is subject to raising external finance.
In the year ending 2009, the CGMR JV mined, on a 100% basis, 1,006,151 tonnes since acquisition of ore grading 28% Fe with
a stripping ratio of 0.97 and produced 273,000 tonnes of magnetite concentrate at an average grade of 62% Fe. Average cash
operating costs for 2009 were below USD 40/t of concentrate excluding management and operator fees. The operation achieved
an average realised iron ore price for the year ended 31 December 2009 of USD65/t with the average price in December USD
73/t, reflecting the upward pricing momentum for iron ore. Since year end, prices realised have increased to USD 87/t in
February 2010.
Activities to optimise the existing pit continue and CGMR is working to consolidate the other operators on the licence. Since
acquiring the Chinese operations, CGMR has undertaken a programme to define upside to the existing resource and has also
identified opportunities to optimise processing to increase recoveries and concentrate grade. These works will form the basis of
future expansion plans. CGMR is currently seeking to raise external finance to assist in the process of acquiring the two adjacent
pits, SBQ and Guqiao, acquiring further deep mining rights and providing further payments to the vendor in accordance with the
original acquisition agreement.
4.2 Resources and Exploration
SRK were engaged in September 2009 to provide an estimate of the resource potential of the enlarged XNS licence. Initial
calculations were based on historical work undertaken in the 1970s including 55 vertical diamond drill holes totalling
c.25,000m of drill core. 5,000m of further twin hole drilling has now been completed and SRK expect an estimate of the
resource to be reported to an international standard by Q3 2010.
4.3 Appointments
On 11 August 2009, CGMR entered into a revised agreement with Green Earth Mining Resources Ltd to operate the mine and
plant. In addition CGMR established a four member management committee, with two representatives from London Mining
and two from the JV partners, Wits Basin. The management committee has the responsibility to liaise with, monitor and advise
the CGMR board on the activities of the operator.
5. Other Investments
5.1 International Coal Company, Colombia (20% owned)
London Mining is currently in detailed discussions with ICC regarding the funding of the construction of the proposed coke
ovens. ICC has also been undertaking a series of desktop studies on the coking coal concessions that it currently holds in the
Socha region where the coke ovens are located.
In December 2009, Jairo Caicedo was contracted to be the acting CEO of ICC. Jairo is highly experienced in coal operations in
Colombia having worked in the Colombian coal industry for most of his career, including for Cerrejon and Milpa.
London Mining plc Operating and Financial Review (continued)
9
5.2 DMC (28% owned)
On 8 August 2008, London Mining, through its wholly-owned subsidiary Rannerdale, announced that it had agreed to take an
initial 39.3% interest for USD 16.5 million in DMC Coal, a company in which parent company DMC Consolidated Limited
(DMC) has a 30.35% interest. Rannerdale made a USD 18.5 million loan to DMC Energy, a subsidiary of DMC. DMC Energy
is the holding company for all the DMC group‟s coal and iron ore assets and prospects in Africa, which include: Rietkuil coal
project, Springbok Flats coal project, Limpopo coal project and various coal prospecting and exploration rights in Botswana
and Swaziland.
On 13 January 2010, Rannerdale converted the USD 18.5 million loan and its net USD 10.5 million investment (following the
USD 6.0 million impairment during H1 2009) in DMC Coal into 28% of the issued share capital of DMC, on a fully diluted
basis.
DMC owns a number of thermal coal properties, the most advanced of which is its 70% owned Rietkuil project. The Rietkuil
project is located in the Delmas district, 80km east of Johannesburg and adjacent to the Exxaro‟s Leeupan Mine. High tension
power lines are close to the property as well as the rail spur to the Delmas Colliery. A full feasibility study on the Rietkuil
project commenced in February 2009 and is due to be released during the first half of 2010. Work for this feasibility study has
included the drilling of the resource to reach a SAMREC compliant measured and indicated resource. Initial results indicate that
a resource of around 200M GTIS can be exploited by open pit methods. Whilst this resource has been prepared by DMC to
comply with SAMREC guidelines, it has not yet been confirmed by a third party competent person and is not yet reportable to
an internationally recognised standard.
DMC Coal also holds the exclusive prospecting rights to the Limpopo project which is situated in the Limpopo/Thuli coal field
adjacent to Coal of Africa‟s Thuli project in South Africa. DMC has a number of other assets, including an earn in right to a
51% holding in the Springbok Flats Energy project which consists of five prospecting rights situated in the southern portion of
the Springbok Flats Coalfield.
6. Resources
London Mining has now attained JORC compliance for over 1.2 billion tonnes of iron ore resources at its 3 operated assets.
Asset Ownership Measured Indicated Inferred Total
% Mt % Fe Mt % Fe Mt % Fe Mt % Fe
Marampa 100 - - 30 23 3 22 33 23
Wadi Sawawin 50 - - 157 41 73 40 230 41
Isua 100 - - 114 37 837 36 951 36
Total 301 38 913 36 1,214 37
7. Technical team appointments
The technical team led by Luciano Ramos has been significantly strengthened over the year with the appointment of Philip
Stirling (General Manager for Mineral Processing, Engineering & Mining Operations), Sergio Guedes (General Manager for
Mineral Resources) and Rinaldo Nardi (Senior Specialist in Mineral Processing and Plant Design). All three have over 25 years
industry experience with particular expertise in developing and operating iron ore mines.
As well as augmentation of the technical and project teams throughout the year, we are extremely pleased to announce the
appointment of Felix Kayat as deputy Chief Operating Officer, who will support Luciano Ramos in overseeing the development
of our four key iron ore projects, but in particular brings significant experience in coal, in particular from operations in South
America, which will be instrumental in the development of our coal assets.
London Mining plc Operating and Financial Review (continued)
10
Financial review
1. Income statement
The principal key performance indicator by which the Company measures the performance of its projects going forward is
earnings before interest, tax, depreciation and amortisation (EBITDA). EBITDA for the three months ended 31 December
2009 is a loss of USD 9.4 million (equivalent Q4 2008: loss of USD 21.9 million) from continuing operations. The EBITDA
for the year ended 31 December 2009 is USD 25.8 million (equivalent year ended 2008: 36.4 million).
The quarter on quarter EBITDA movement is largely explained by the variance in the return bonus plan, with a Q4 2009 charge
of only USD 1.1 million, which compares to Q4 2008: USD 16.1 million. The 2008 return bonus plan was a scheme to
compensate certain option and long term incentive award holders for the fall in share price resulting from the 200 pence per
share Return of Cash to shareholders in November 2008. The charge is lower in 2009 as the bonus was payable on vesting of
the underlying awards and the majority of the participating awards had already vested by the end of 2008.
We also note that 2009 includes the proportionally consolidated results from the Chinese joint venture with effect from 23 April
2009; the prior year included no operating results from continuing operations.
Included in EBITDA for the year ended 31 December 2009 is:
USD 2.5 million (2008: nil) gross profit in respect of 50% of the profits of Chinese operations held by CGMR BVI;
USD 2.3 million (2008: nil) net management fee receivable by the Group from CGMR BVI after eliminating the Group‟s
50% share of the cost on consolidation;
USD 33.4 million of administration costs, including
i) staff related costs of USD 18.6 million (2008: 29.6 million) comprising:
USD 4.2 million (2008: USD 16.1 million) charge arising from the return bonus plan1; this charge reflects the
non-cash IFRS 2 charge: cash payments for the return bonus plan during the year were USD 2.0 million (2008
USD 13.3 million) and a further USD 7.4 million is due (subject to the return bonus plan rules), payable over the
next three years, of which USD 1.4 million will be covered by proceeds from the exercise of respective options.
USD 4.8 million (2008: USD 2.4 million) staff costs for Directors and key management;
USD 4.3 million of other staff costs (2008: USD 1.7 million). This increase is attributable to increased staff
numbers in the Group‟s iron ore technical team and the London head office; and increased costs in 2009 resulting
from bonus payments on completion of development milestones and the AIM listing. In the year ended
December 2008, staff primarily received bonuses on the sale of the Brazilian operations, which were classified
within discontinued operations. There were no other significant bonuses paid in 2008.
A non-cash charge of USD 5.3 million (2008: USD 9.4 million) of share based payments to staff, Directors and
key management. This reduction is due to the majority of Director options vesting in July 2008.
ii) Other costs:
USD 4.7 million (2008: USD 1.8 million) of consultancy and legal fees. Additional fees were incurred in 2009 as
due diligence was performed on mergers and acquisition opportunities which were not pursued.
USD 2.2 million (2008: nil) listing fees (excluding amounts paid to auditors, which are disclosed separately)
incurred on the Company‟s listing on the AIM market of the London Stock Exchange in November 2009.
1 2009 compensation payments made under the Return Bonus Plan relate to the “Return of Cash” to shareholders in the second half of 2008.
Full details of the compensation scheme are disclosed in the 2008 annual report. In summary, participants in the Company‟s share-based
remuneration schemes receive an equivalent compensation payment for the loss of value in awards held at the time of the Return of Cash. The
compensation payment vests in accordance with underlying terms of the original award to which it relates.
London Mining plc Operating and Financial Review (continued)
11
1. Income statement (continued)
In addition to items classified within EBITDA, the Group recognised the following exceptional item in June 2009:
USD 6.0 million (2008: nil) impairment on the Group‟s investment in its associate, DMC Coal following DMC‟s
representation that it would no longer proceed with the Pixley Ka Seme coal prospect.
Net finance income
The Group no longer has material cash balances and / or borrowings in other currencies other than USD, being the Group‟s
presentational currency. The net USD 48.1 million foreign exchange loss in Q4 2008 included the net USD 46.6 million loss
arising in respect of the 200 pence per ordinary share Return of Cash to shareholders, following the conversion of USD 400
million into GBP 224 million in September 2008 to eliminate future foreign exchange exposure on the GBP return of cash in
November 2008.
Taxation
Tax is payable on the local Chinese profits earned by Xiaonanshan Mining Co Limited (XNS) and Nanjing Sudan Mining Co
Limited (Sudan).
2. Balance sheet
Equity attributable to equity holders of the parent has fallen from USD 367.6 million at 31 December 2008 to USD 327.2
million at 31 December 2009. This was principally due to the loss for the year of USD 34.4 million and the net movement in
the Employee Benefit Trust of USD 9.0 million, largely due to further acquisition of the Company‟s shares from the market to
meet its future obligations.
Acquisition of CGMR (BVI)
The most significant change in the composition of the balance sheet arose from the Company entering into a 50:50 joint venture
agreement with Wits Basin Precious Minerals, Inc. (Wits Basin). Under the terms of the agreement, the Company subscribed
USD 38.7 million for 100 A Shares in the joint venture entity China Global Mining Resources (BVI) Limited (CGMR BVI) and
made a direct loan to Wits Basin of USD 5.75 million, making a total initial investment of USD 44.5 million. As part of the
joint venture agreement, CGMR BVI passed the cash received from London Mining of USD 38.7 million to its wholly owned
subsidiary China Global Mining Resources Limited (CGMR). CGMR then completed the acquisition of two Chinese
companies: Xiaonanshan Mining Co Limited (XNS) and Nanjing Sudan Mining Co Limited (Sudan).
The Company has proportionately consolidated 50% of CGMR BVI from 23 April 2009. For accounting purposes the USD
38.7 million investment in CGMR BVI is treated as debt due from the joint venture of USD 34.9 million (discounted for the
timings of the anticipated cash inflows) and an equity contribution to the joint venture of USD 3.8 million (in exchange for the
Group‟s 50% interest). The Group‟s consolidated balance sheet at 31 December 2009 shows the following balances in respect
of the Chinese joint venture:
USD 5.75 million non-current „loan to joint venture partner‟ representing the interest-bearing loan to Wits Basin (included
in non-current loans and receivables note 10);
USD 17.85 million net non-current „loan to joint venture‟ representing the joint venture partner‟s 50% share of the original
USD 34.9 million debt due, as noted above, accreted for the period to 31 December 2009 for the timings of the anticipated
cash inflows (included in non-current loans and receivables note 10); and
USD 2.3 million net management fee receivable into the Group from the joint venture (included in non-current loans and
receivables note 10)
Further details of the accounting of this transaction are shown in note 11 to the financial statements.
London Mining plc Operating and Financial Review (continued)
12
2. Balance sheet (continued)
Intangible assets
The Group continued to invest in exploration and evaluation activity, principally in Sierra Leone, Saudi Arabia and Greenland
with these direct costs being capitalised as intangible assets. Intangible assets increased from USD 20.2 million at 31 December
2008 to USD 49.3 million at 31 December 2009. At 31 December 2009, Group intangible assets largely comprised USD 12.7
million for Sierra Leone, USD 15.7 million for Saudi Arabia and USD 19.4 million for Greenland.
Property, plant and equipment
The Group‟s property, plant and equipment has increased to USD 48.3 million (2008: USD 1.1 million). USD 44.6 million is
held in the Chinese operations, which includes a balance of USD 34.9 million resulting from the fair value attributed to the
Group‟s share of mineral reserves and resources acquired. The remainder of the balance includes USD 1.1 million of assets in
Isua, Greenland, which consist largely of the container camp and USD 2.2 million in Marampa, Sierra Leone largely incurred
on the construction of the haul road to the proposed port loading facility.
Investment in associates
London Mining's investment in associates of USD 14.9 million at 31 December 2009 (31 December 2008: USD 20.6 million)
comprises equity investments of USD 5.0 million in International Coal Company Ltd (ICC) and USD 9.9 million in DMC Coal.
This balance is stated net of an impairment charge of USD 6.0 million, made in June 2009, relating to the Group‟s investment
in its associate, DMC Coal (see note 6). The Group‟s total investment in the DMC Group at 31 December 2009, subsequent to
the impairment, was USD 28.4 million comprising the equity investment referred to above (USD 9.9 million) and the
convertible loan receivable (USD 18.5m).
Non –current loans and receivables
The USD 51.0 million (2008: USD 18.5 million) non-current loans and receivables include the USD 18.5 million loan to the
DMC Group, which along with the 39.3% investment in DMC Coal has been converted into equity of 28% of DMC
Consolidated in January 2010, see note 17.
Trade and other payables
The USD 21.9 million trade and other payables balance (2008: USD 11.8 million) has increased from the prior year due to
capital accruals relating from increased project activity associated with the Wadi Sawawin bankable feasibility study,
completed in December 2009, and the Isua prefeasibility study, which was completed in February 2010.
Deferred consideration payable
The USD 8.7 million deferred consideration is the Group‟s 50% share of the residual acquisition cost payable to the vendor of
the Chinese operations. It has been included within current liabilities on the balance sheet; however, the joint venture is in
discussions with the vendor to defer payment in light of its plans to raise external finance prior to seeking a listing on the Hong
Kong stock exchange.
Other non-current liabilities
The USD 4.9 million of other non-current liabilities consist of the Group‟s share of long term liabilities due to the joint venture
partner from CGMR.
Deferred tax liabilities
The USD 8.6 million deferred tax liability has all arisen on the acquisition of the Chinese operations in relation to the fair value
attributable to the in situ mineral reserves and resources on acquisition.
London Mining plc Operating and Financial Review (continued)
13
3. Cash flow
Total cash decreased during the year by USD 110.8 million (net of foreign exchange) to USD 205.5 million.
In summary the net decrease in cash during the period resulted from:
USD 19.1 million net outflow from operating activities, (2008: USD 18.0 million);
USD 80.1 million net outflow from investing activities, (2008: USD 697.1 million inflow); and
USD 12.0 million net outflow from financing activities, (2008: USD 381.0 million outflow).
Operating cash outflow:
The USD 19.1 million operating cash outflow has arisen from the USD 34.4 million loss for the year adjusted for non cash
items, including:
USD 5.3 million share based payment expense;
USD 6.0 million impairment in associate made in June 2009; and
USD 2.3 million increase in receivables from the net management fee payable to the Group from the Chinese operations.
Note that the movement in accruals for capital expenditure has been adjusted when calculating the cash outflows from
investing activities below.
Investing cash outflows:
USD 38.7 million investment in CGMR BVI (see note 11);
USD 5.75 million loan to Wits Basin (joint venture partner) (see note 11);
USD 5.0 million convertible loan to Atacama Mining Resources (BVI) in relation to Chilean iron ore exploration
opportunities (see note 10); and
USD 29.3 million spent on intangible and tangible assets, reflecting the Group‟s ongoing development of its projects as
follows:
o USD 5.6 million Marampa, Sierra Leone;
o USD 9.3 million Wadi Sawawin, Saudi Arabia;
o USD 11.5 million Isua, Greenland; and
o USD 2.6 million onshore Chinese stay-in-business capital expenditure.
Financing cash outflow:
USD 11.1 million loan to the Group‟s Employee Benefit Trust to acquire additional London Mining plc shares on market,
to meet its obligations under the Company‟s share-based remuneration scheme.
4. AIM listing
On the 6 November 2009, the Company listed on the AIM market of the London Stock Exchange (AIM). The listing on AIM
was completed by placing 37,239,225 existing ordinary shares at GBP 1.924 (NOK 18) per ordinary share with over 30
recognised institutions. The placing was conducted by Liberum Capital Limited (nominated advisor and joint broker) and GMP
Securities Europe LLP (joint broker) and consequently the Company did not receive any proceeds from the placing.
With its listing on AIM, the Company benefits from the presence of established mining sector research coverage in London and
improved access to global investors. The listing on AIM has also allowed existing shareholders to trade more freely in the
Company‟s stock.
The Company has retained its listing on the Oslo Axess and this will be reviewed after an appropriate period of time.
London Mining plc Operating and Financial Review (continued)
14
5. Liquidity and going concern
At 31 December 2009, the Group had cash of USD 205.5 million and no material borrowings. Under the terms of the
Substantial Shareholder Exemption (SSE), which granted the 2008 disposal of the Group‟s Brazilian operations tax free status,
the Group is to reinvest a significant proportion of the proceeds into qualifying trading activities.
Original clearance was sought and received from HMRC in July 2008. Because of subsequent changes to the original planned
investment programme, an updated clearance was obtained from HMRC on 17 September 2009 which reflects the Group‟s
current plans. The Group remains committed to delivering its approved strategy and believes the SSE clearance is still
effective.
The Group‟s projects in Sierra Leone, Saudi Arabia, Greenland and China will all require significant funding in the next year
for their continued project development. The Group expects its Chinese joint venture (CGMR) and the Saudi joint venture to
raise external finance to fund their development. Construction of the 1.5mtpa tailings processing plant and related infrastructure
for the Group‟s Marampa project in Sierra Leone has commenced and carries an estimated total cost of USD 80 million,
including contingency, which is expected to be funded from existing cash reserves. The Group has minimal committed
expenditure and retains the ability to defer certain forecast capital expenditures if required.
Resource estimation expenditure to JORC reporting standard for the projects in Sierra Leone, Saudi Arabia and Greenland will
also be funded from existing cash reserves.
The Group‟s forecasts and projections, taking account of reasonably possible changes in trading performance and the timing of
project commissioning, show that the Group has sufficient committed liquidity to fund its committed expenditure and will be
able to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going
concern basis.
6. Forward looking information
This financial report contains certain forward looking statements with respect to the financial condition, results, operations and
business of the Group. These statements and forecasts involve risk and uncertainty because they relate to events that depend on
circumstances in the future. There are a number of factors that could cause actual results or developments to differ from those
expressed or implied by these forward looking statements.
London Mining plc Consolidated income statement
For the year ended 31 December 2009
15
Unaudited Unaudited Unaudited Unaudited
Three months
ended
Three months
ended
Year
ended
Year
ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
Note $’000 $‟000 $’000 $‟000
Continuing operations
Revenue 2,945 - 8,878 - Cost of sales (2,661) - (6,377) - Gross profit 284 - 2,501 - Other operating income 846 - 2,330 - Administrative expenses 5 (11,813) (22,001) (33,423) (36,815)
Loss from operations (10,683) (22,001) (28,592) (36,815)
Impairment of investment in associate 6 - - (6,000) - Share of results of associates (net of tax) 12 (305) (123) (386)
Finance income 7 832 5,067 2,893 28,860
Finance costs 7 (701) (51,401) (2,171) (74,669)
Loss before taxation (10,540) (68,640) (33,993) (83,010)
Taxation (383) - (402) -
Loss for the period - continuing operations (10,923) (68,640) (34,395) (83,010)
Discontinued operations
Profit from discontinued operations 9 - - - 4,897
Post-tax profit on disposal of discontinued
operations - - -
664,194
Profit for the period – discontinued operations - - - 669,091
(Loss) / profit for the period (10,923) (68,640) (34,395) 586,081
Attributable to:
- Equity holders of parent (10,923) (68,603) (34,355) 586,118
- Minority interest - (37) (40) (37)
(10,923) (68,640) (34,395) 586,081
Basic & diluted (loss)/ earnings per share (USD per
share)
From continuing operations 8 (0.11) (0.64) (0.33) (0.81)
From discontinued operations 8 - - - 6.50
(0.11) (0.64) (0.33) 5.69
Consolidated statement of comprehensive income
(Loss) / profit for the period (10,923) (68,640) (34,395) 586,081
Exchange differences arising on change in functional currency - (5,382) - (5,382)
Exchange difference on consolidation of non USD operations(1)
(139) 5,401 628 6,168
Total comprehensive income for the period (11,062) (68,621) (33,767) 586,867
(1)
The exchange differences on translating foreign operations is entirely attributable to the equity holders of the parent.
London Mining plc Consolidated balance sheet
As at 31 December 2009
16
Unaudited Audited
As at as at
31December 31 December
2009 2008
Note $’000 $‟000
Non-current assets
Intangible assets 49,292 20,161
Property, plant and equipment 48,270 1,137
Investment in associates 6 14,910 20,610
Inventories 600 449
Loans and receivables 10 51,020 18,500
164,092 60,857
Current assets
Inventories 66 8
Receivables 10 3,705 2,735
Cash and cash equivalents 205,455 316,286
209,226 319,029
Total assets 373,318 379,886
Current liabilities
Trade and other payables (21,906) (11,821)
Deferred consideration (8,659) -
Current tax liabilities (328) -
(30,893) (11,821)
Net current assets 178,333 307,208
Non-current liabilities
Other non-current liabilities (4,889) -
Provisions (1,412) -
Deferred tax liabilities (8,565) (32)
(14,866) (32)
Total liabilities (45,759) (11,853)
Total net assets 327,559 368,033
Equity
Share capital 398 398
Share premium account 20,094 19,954
Shares held in employee benefit trust (14,167) (5,159)
Other reserves 21,523 19,543
Retained earnings 299,312 332,858
Equity attributable to equity holders of the parent 327,160 367,594
Minority interest 399 439
Total equity 327,559 368,033
London Mining plc Consolidated statement of changes in equity (unaudited)
For the year ended 31 December 2009
17
Share
capital
Share
premium
account
Shares held
in
employee
benefit trust
Retained
Earnings
1 Warrant
and
option
reserve
2 Foreign
exchange
reserve
Equity
attributable
to equity
holders of
the parent
Minority
interest
Total
equity
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 31 December 2007 362 101,093 - (21,243) 11,493 18,377 110,082 - 110,082
Changes in equity for year ended 31 December 2008
Exchange difference arising on change in functional currency - - - - - (5,382) (5,382) - (5,382)
Exchange difference on consolidation of non USD operations - - - - - 6,168 6,168 - 6,168
Recognition of share-based payments - - 877 - 11,018 - 11,895 - 11,895
Issue of share capital (net of expenses) 36 24,977 - 2,586 (7,450) - 20,149 - 20,149
Share premium extinguished in redemption of C shares - (106,116) - - - - (106,116) - (106,116)
Income received by Employee Benefit Trust on C share
redemption - - - 3,217 - - 3,217 - 3,217
Dividends paid on „B‟ shares - - - (237,820) - - (237,820) - (237,820)
Acquisition of subsidiary - - - - - - - 476 476
Acquisition of shares for employee benefit trust - - (6,036) - - - (6,036) - (6,036)
Foreign exchange disposed on sale of subsidiary - - - - - (14,681) (14,681) - (14,681)
Profit for the year - - - 586,118 - 586,118 (37) 586,081
__----------------
--------------------
---------
__---------------------
------------------------
__----------------
--------------------
---------
__----------------
--------------------
---------
__----------------
--------------------
--------
__----------------------
-----------------------
__---------------
------------------
------------
__-------------------
-----------------------
---
Balance at 31 December 2008 398 19,954 (5,159) 332,858 15,061 4,482 367,594 439 368,033
Changes in equity for year ended 31 December 2009
Exchange difference on consolidation of non USD operations - - (288) - - 916 628 - 628
Recognition of share-based payments - - 2,386 809 1,064 - 4,259 - 4,259
Issue of share capital (net of expenses) on exercise of options - 140 - - - - 140 - 140
Acquisition of shares for employee benefit trust - - (11,106) - - - (11,106) - (11,106)
Loss for the year - - - (34,355) - - (34,355) (40) (34,395)
Balance at 31 December 2009 398 20,094 (14,167) 299,312 16,125 5,398 327,160 399 327,559
1 The warrant and option reserve includes warrants and options granted as equity settled employee benefits and warrants issued for cash. 2 The foreign exchange reserve movement in the year to 31 December 2008 includes exchange differences arising on change in functional currency of the company
London Mining plc Consolidated cash flow statement
For the year ended 31 December 2009
18
Year ended 31 December
Unaudited Audited
2009 2008
Note $’000 $‟000
Cash flows from operating activities
Cash used by operations 12 (19,761) (23,917)
Interest received 919 8,747
Interest expense (16) (7,648)
Income taxes paid (261) -
Net cash outflow from operating activities – continuing operations (19,119) (22,818)
Net cash inflow from operating activities – discontinued operations - 4,845
Net cash outflow from operating activities – total Group (19,119) (17,973)
Cash flows from investing activities
Loans and investments in joint ventures 11 (38,727) -
Loans and investments in associates (1,000) (21,575)
Other loans and investments 11 (5,750) (1,000)
Convertible loans issued to third parties (5,000) (18,500)
Cash acquired on acquisition of joint venture 140 -
Acquisition of subsidiaries net of cash acquired - (227)
Payments to acquire intangible assets 12 (24,771) (10,045)
Purchase of property, plant and equipment (4,494) (804)
Proceeds from sale of discontinued operations, net of transaction costs (541) 771,188
Net cash (outflow) / inflow from investing activities – continuing operations (80,143) 719,037
Net cash outflow from investing activities – discontinued operations - (21,899)
Net cash (outflow) / inflow from investing activities – total Group (80,143) 697,138
Cash flows from financing activities
Acquisition of shares by the Employee Benefit Trust (11,106) (2,819)
Proceeds from issue of ordinary shares. share options and warrants 140 19,831
Cash outflow on share based payments (1,060) -
Callable and Puttable Bonds 2007/2012 (defeased) - (67,598)
Dividends paid on „B‟ shares - (228,489)
Redemption of „C‟ shares - (101,952)
Net cash outflow from financing activities – continuing operations (12,026) (381,027)
Net cash outflow from financing activities – discontinued operations - (1,500)
Net cash outflow from financing activities – total Group (12,026) (382,527)
Net (decrease) / increase in cash and cash equivalents (111,288) 296,638
Cash and cash equivalents at beginning of period 316,286 90,718
Exchange differences 457 (71,070)
Cash and cash equivalents at the end of the year 205,455 316,286
London Mining plc Notes to the condensed consolidated financial statements
For the year ended 31 December 2009
19
1. General information
London Mining plc is a company incorporated in the United Kingdom under the Companies Act and during the year ended 31
December 2009 was listed on the Oslo Axess stock exchange throughout. The Company listed on the London AIM stock
exchange on 6 November 2009. The address of the registered office is 39 Sloane Street, London, SW1X 9LP. The consolidated
financial statements of the Company as at and for the quarter ended 31 December 2009 comprise the Company, its subsidiaries
and its share of jointly controlled entities (together referred to as “the Group”) and the Group‟s interests in associates.
The financial information for the year ended 31 December 2009 or 2008 does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2008 have been delivered to the
Registrar of Companies and are available on the Group‟s website www.londonmining.co.uk. The auditors reported on those
accounts, their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. The audit of the statutory accounts for the year ended 31 December
2009 is not yet complete. The accounts will be finalised on the basis of the financial information presented by the Directors in
this preliminary announcement and will be delivered to Registrar of Companies following the Company‟s Annual General
Meeting.
The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing
the condensed financial statements. Further details are in included in the “Liquidity and going concern” section of the Financial
Review.
2. New and revised International Financial Reporting Standards
(a) Adoption of new and revised International Financial Reporting Standards
The Group has adopted with effect from 1 January 2009, IFRS 8 Operating Segments, IAS 1 Presentation of Financial
Statements – Revised, IAS 1 Presentation of Financial Statements Improvements, IFRS 7 Financial Instruments: Disclosures –
Amendments and IAS 23 Borrowing Costs.
IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board of
Directors to allocate resources to segments and assess their performance. In contrast, the predecessor Standard (IAS 14
Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards
approach, with the Group‟s system of internal financial reporting to the Board of Directors serving only as a starting point for
the identification of such segments.
Up until the AIM listing in November 2009, the Board of Directors reviewed the performance of the Group based on two
business segments: the mining, extraction and production of iron ore and the mining, extraction and production of coal.
Following the listing the Board of Directors moved its focus for strategic decision making and allocation of resources to
individual projects, rather than at the consolidated division level. This is particularly relevant during development phase of
each project as the Group looks to optimise each asset.
The Board of Directors evaluates the performance of the Group principally with reference to revenue generated, earnings before
interest and tax (EBITDA), expected capital costs and forecast production. Segment result represents the EBITDA for each
segment and excludes any allocation of central administration costs and overheads. Segmental disclosures are presented in note
4.
The adoption of IAS 1 has resulted in a consolidated statement of comprehensive income being presented as a primary
statement. The Group has elected to continue to present a separate income statement.
The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. The
application of these disclosures does not require any restatement of the comparatives disclosed in these accounts.
The adoption of IAS 23 (as revised in 2007) Borrowing Costs during the year has not resulted in a material impact on the
financial statements of the Group.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
20
3. Accounting policies The annual financial statements of London Mining plc are prepared in accordance with International Financial Reporting
Standards as adopted for use by the European Union (IFRSs). The condensed consolidated financial statements included in this
fourth quarter report have been prepared in accordance with International Accounting Standard 34 'Interim Financial
Reporting', as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial
statements as applied in the Group's financial statements for the year ended 31 December 2008, except for as described below. Joint Ventures
During the year ended 31 December 2009, the Group acquired its first interest in a joint venture entity. A joint venture entity is
an entity in which the Group holds a long term interest and shares joint control over the strategic, financial and operating
decisions with one or more other ventures under a contractual arrangement.
The Group‟s share of the assets, liabilities, income, expenditure and cash flows of such jointly controlled entities are accounted
for using proportionate consolidation. Proportionate consolidation combines the Group‟s share of results of the joint venture
entity on a line by line basis with similar items in the Group‟s financial statements.
4. Segment reporting Following the AIM listing on 6 November 2009, the Board of Directors moved its focus on strategic decision making and
capital allocation to an individual project level. This is particularly relevant during the development phase of each project as
the Group looks to optimise each asset. Prior to the listing on AIM, London Mining was focussed on two divisions; iron ore
and coal. As each project is transformed through the development and expansion phases and the Group grows it may revisit its
internal management reporting structure accordingly.
The Group operates in four principal geographical areas, Sierra Leone, Saudi Arabia, Greenland and China.
Segmental information is presented for continuing operations only. The Brazilian operations discontinued in the prior year,
which are described in more detail in note 9, are therefore excluded. The Group‟s discontinued operations relate to the mining,
extraction and production of iron ore.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
21
4. Segment reporting (continued)
Segment revenues and results
The following is an analysis of the Group‟s revenue and results from continuing operations by reportable segment. The key
segment result presented to the Board of Directors for strategic decision making and allocation of resources is EBITDA. Group
EBITDA represents loss from operations excluding depreciation, (and therefore excludes share of results of associates and
impairment of investment in associate). Group EBITDA is analysed below..
The analysis of the Group‟s revenue and results from continuing operations by reportable segment for the year ended 31
December 2009 is as follows:
Segment revenue Segment result Unaudited Unaudited Unaudited Unaudited
Year ended
31 December
2009
Year ended
31 December
2008
Year ended
31 December
2009
Year ended
31 December
2008
$’000 $‟000 $’000 $‟000
Iron ore projects - Sierra Leone - - (4,740) (2,996)
- Saudi Arabia - - (1,574) -
- Greenland - - (689) (4)
- China 8,878 - 5,952 -
Unallocated costs including corporate - - (24,718) (33,426)
Group Revenue 8,878
Group EBITDA (25,769) (36,426)
Total depreciation charge for the year (2,823) (389)
Loss from operations (28,592) (36,815)
Impairment of investment in associate (6,000) -
Share of results of associates (net of tax) (123) (386)
Finance income 2,893 28,860
Finance costs (2,171) (74,669)
Loss before tax (continuing operations) (33,993) (83,010)
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
22
4. Segment reporting (continued)
Segment revenues and results (continued)
The analysis of the Group‟s revenue and results from continuing operations by reportable segment for the three months ended
31 December 2009 is as follows:
Segment revenue Segment result Unaudite
d Unaudited Unaudited Unaudited
Three months
ended
31 December
2009
Three months
ended
31 December
2008
Three months
ended
31 December
2009
Three months
ended
31 December
2008
$’000 $‟000 $’000 $‟000
Iron ore projects - Sierra Leone - - (1,292) (1,158)
- Saudi Arabia - - (337) -
- Greenland - - (343) (4)
- China 2,945 - 1,864 -
Unallocated costs including corporate (9,291) (20,698)
Group Revenue 2,945 -
Group EBITDA - (9,399) (21,860)
Total depreciation charge for the year (1,284) (141)
Loss from operations (10,683) (22,001)
Share of results of associates (net of tax) 12 (305)
Finance income 832 5,067
Finance costs (701) (51,401)
Loss before tax (continuing operations) (10,540) (68,640)
Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the year (2008: Nil). All revenue relates to the sale of iron ore concentrate made by CGMR and is made to several local buyers and traders.
EBITDA includes unallocated costs for non-cash charges in relation to share based payments. There are no other material non-
cash charges included in EBITDA.
Impairment losses of USD 6.0 million (2008: Nil) were recognised in respect of the investment in DMC Coal Mining (Pty) Ltd
in June 2009 (see note 6).
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
23
4. Segment reporting (continued)
Segment assets and liabilities
Segment assets Segment liabilities
Unaudited Unaudited Unaudited Unaudited
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$’000 $‟000 $’000 $‟000
Iron ore projects - Sierra Leone 15,724 7,275 (991) (258)
- Saudi Arabia 16,039 2,398 (2,196) -
- Greenland 21,041 7,498 (1,483) -
- China 67,643 - (23,890) -
Total 120,447 17,171 (28,560) (258)
Group investment in associates 14,910 20,610 - -
Unallocated including corporate 237,961 342,105 (17,199) (11,595)
Total 373,318 379,886 (45,759) (11,853)
For the purposes of monitoring segment performance and allocating resources between segments, all assets are allocated to
reportable segments other than investments in associates and convertible loans and other investments, which are classified as
“unallocated”. Other projects include the convertible loan to Atacama Mining Resources (BVI) of USD 5 million.
All liabilities are allocated to reportable segments other than liabilities held within the corporate head office.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
24
4. Segment reporting (continued)
Depreciation and
amortisation
Additions to non-current
assets(1)
Unaudited Unaudited Unaudited Unaudited
Three months
ended
31 December
2009
Three months
ended
31 December
2008
Three months
ended
31 December
2009
Three months
ended
31 December
2008
$’000 $‟000 $’000 $‟000
Iron ore projects - Sierra Leone 81 62 3,328 513
- Saudi Arabia 5 - 7,483 1,756
- Greenland 284 - 6,331 1,201
- China 881 - 3,842 -
Investments in associates - - - 420
Unallocated costs including corporate 33 79 259 401
Total 1,284 141 21,243 4,291
(1)The non-current asset additions above comprise additions to intangible assets, property plant and equipment, non-current
inventory, and investments in associates but exclude loans, convertible loans and receivables. Non-current assets acquired on
acquisition of the China operations have also been included. During 2008, up to the date of disposal of 19 August 2008, the
discontinued Brazilian operations had additions to property, plant and equipment of USD 21.9 million which is not included in
the table above as it is classified as discontinued.
Depreciation and
amortisation
Additions to
non-current assets(1)
Unaudited Unaudited Unaudited Unaudited
Year ended
31 December
2009
Year ended
31 December
2008
Year ended
31 December
2009
Year ended
31 December
2008
$’000 $‟000 $’000 $‟000
Iron ore projects - Sierra Leone 281 218 5,791 2,110
- Saudi Arabia 12 - 13,348 2,398
- Greenland 338 - 13,322 6,071
- China 2,059 - 47,070
Other projects - - 198 1,386
Investments in associates - - - 21,044
Unallocated costs including corporate 133 171 99 365
Total 2,823 389 79,828 33,374
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
25
5. Administrative expenses The key components of administrative expenses are as follows:
Unaudited Unaudited Unaudited Audited
Three months Three months Year Year
ended ended ended Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
$’000 $‟000 $’000 $‟000
Return Bonus Plan1 1,148 16,100 4,230 16,100
Share-based payments to consultants - 90 - 1,312
Staff costs
Share-based payments to staff, directors and key
management2 2,412 3,430 5,319 9,388
Directors and key management remuneration excluding
share-based payments 2,364 539 4,765 2,420
Other staff costs 1,449 459 4,319 1,704
Professional and legal fees 1,052 548 4,690 1,842
Depreciation 3 403 141 764 389
Fees payable to the Group‟s auditors for the audit of the
Group‟s annual accounts 170 143 279 143
Fees payable to the Group‟s auditors for other services to the
Group 4
330 5 644 5
Fees payable to other audit firms and prior year auditors 33 140 63 228
Operating lease costs – property 197 104 697 253
AIM listing fees (excluding amounts paid to auditors) 412 - 2,191 -
1
Following the approval of the Return of Cash to shareholders of 200 pence per ordinary share at the General Meeting held on
10 November 2008, bonus awards were made under the Return Bonus Plan to certain option holders and two LTIP award
holders. Payment is due within five business days of the vesting of the related option / LTIP award or, if the related option /
LTIP award is already vested, within five business days of (and including) the Return of Cash. In aggregate, USD 2.0 million
has been paid in cash for the year ended 31 December 2009 (2008 USD 13.3 million) and a further USD 7.4 million is due
(subject to the Return Bonus Plan rules), payable over the next three years, of which USD 1.4 million will be covered by
proceeds from the exercise of respective options.
2 The amount in respect of share-based payments is non-cash and relates solely to equity settled arrangements.
3 Depreciation of USD 2,059,000 is included within cost of sales in the income statement relating to CGMR BVI for the year
ended 31December 2009. Total depreciation of USD 2,823,000 is included in the loss for the year ended 31 December 2009.
Depreciation of USD 881,000 relating to CGMR BVI has is included within cost of sales for the three months ended 31
December 2009
4 Other services undertaken by the Group‟s auditors included work performed on the AIM listing of USD 273,000, taxation
services of USD 257,000 and other corporate finance services of USD 114,000.
6. Impairment of investment in associate
In August 2009, following the application review of the Pixley Ka Seme coal project by the South African Department of Minerals and
Energy, Delta Mining Consolidated (Pty) Ltd, management brought to London Mining‟s attention that it would no longer proceed with
this prospect. As a result of this information, London Mining wrote down its investment in DMC Coal Mining (Pty) Ltd by USD 6.0
million as at 30 June 2009, reflecting the amount of the acquisition cost the Group had attributed to this particular project. DMC Coal
held this asset in its books at cost rather than fair value, and as such did not have an equivalent asset write down.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
26
7. Finance income and costs
Unaudited Unaudited Unaudited Audited
Three months Three months Year Year
ended ended ended Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
$’000 $‟000 $’000 $‟000
Finance income
Interest income from cash and cash equivalents 154 3,758 919 8,747
Interest income from loans receivable 259 - 342 -
Unwinding of discount on net loan receivable from joint
venture 137 - 375 -
Exchange gains 282 1,309 1,257 20,113
832 5,067 2,893 28,860
Unaudited Unaudited Unaudited Audited
Three months Three months Year Year
ended ended ended Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
$’000 $‟000 $’000 $‟000
Finance costs
Interest expense - 38 16 71
Interest on Callable and Puttable Bonds 2007/20121 - - - 6,408
Unwinding of discount on long term liabilities 134 - 307 -
Exchange losses 567 51,363 1,848 68,190
701 51,401 2,171 74,669
1
The callable and puttable bonds were repaid on 1 October 2008 using proceeds from the disposal of the Group‟s Brazilian
operations.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
27
8. Earnings per share
(a) Basic Basic earnings per share is calculated by dividing the earnings / (loss) attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period, excluding shares held by the Employee Benefit Trust.
Unaudited Unaudited Unaudited Audited
Three
months
Three
months
Year
Year
ended ended ended Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
$’000 $‟000 $’000 $‟000
Loss from continuing operations attributable to equity holders
of the Company (10,923) (68,603) (34,355) (82,973)
Profit from discontinued operations attributable to equity
holders of the Company - - - 669,091
(10,923) (68,603) (34,355) 586,118
Weighted average number of ordinary shares in issue 102,827,200 107,357,884 103,741,724 102,871,987
Unaudited Unaudited Unaudited Audited
Three
months
Three
months
Year
Year
ended ended ended Ended
31 December 31 December 31 December 31 December
2009 2008 2009 2008
Earnings per share attributable to equity holders of the
company
$’000 $‟000 $’000 $‟000
Continuing operations (0.11) (0.64) (0.33) (0.81)
Discontinued operations - - - 6.50
Total earnings per share (0.11) (0.64) (0.33) 5.69
(b) Diluted The outstanding options, warrants and LTIP awards at 31 December 2009 and 2008 represent anti-dilutive potential ordinary
shares. Therefore, basic and diluted earnings per share are the same for the current and prior period.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
28
9. Discontinued operations
On 19 August 2008, the Group completed the sale of its Brazilian operations to ArcelorMittal. Details of this transaction can be
found in the Group‟s annual report for the year ending 31 December 2008. Profit from discontinued operations recognised in
the prior year was USD 4.9 million; profit recognised on disposal of discontinued operations was USD 664.2 million.
10. Loans and receivables
Unaudited Audited
2009 2008
Note $’000 $‟000
Non-current
Prepayments 590 -
Loan to joint venture partner 11 5,750 -
Loan to joint venture 11 17,850 -
Management fee receivable from joint venture 11 2,330 -
Convertible loans receivable (1)
5,000 -
Convertible loans to associates (2)
19,500 18,500
51,020 18,500
Current
Prepayments 595 266
Receivable from joint venture partner 690 -
Convertible loan receivable from joint venture partner (3)
1,000 -
Receivable from joint venture 559 1,000
Other receivables 861 1,469
3,705 2,735
54,725 21,235
The Directors consider the fair value of receivables at 31 December 2009 not to be materially different to their carrying value
and there are no impairment provisions.
(1) Convertible loans receivable of USD 5.0 million relate to a loan made to Atacama Mining Resources (BVI), a
company with the option to acquire certain exploration and mining licences in Chile. The loan is unsecured and
interest free. The loan is convertible at any time by London Mining into 50% of Atacama Mining Resources (BVI).
(2) Convertible loans to associates of USD 19.5 million includes a USD 18.5 million receivable from the DMC Group,
which, along with the Group‟s 39.3% share of DMC Coal Mining (Pty) Limited, has been converted into a 28%
holding in DMC Consolidated in January 2010 (see note 17). In addition on 27 November 2009, a USD 1 million
convertible loan was made to International Coal Company Limited. Interest is charged on this loan at 8% per annum.
This loan is due for repayment at the earliest of any date after 27 November 2011, or on a change of control of
International Coal Company Ltd.
(3) Current receivables from the joint venture partner include USD 1.0 million convertible into shares in Wits Basin at
USD 0.10 per share. This loan is convertible on demand following written notice provided to Wits Basin. Interest is
accrued on this at 8% per annum.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
29
11. Investment by London Mining plc in the CGMR BVI joint venture
On 23 April 2009, the Company completed a joint venture agreement with Wits Basin Precious Minerals, Inc. (Wits Basin) in
relation to a 50:50 joint venture company, China Global Mining Resources (BVI) Limited (CGMR BVI). Under the terms of
the agreement, the Company subscribed USD 38.7 million for 100 A Shares in CGMR BVI and made a direct loan to Wits
Basin for USD 5.75 million, making a total initial investment of USD 44.5 million.
As part of the joint venture agreement, the cash received from London Mining of USD 38.7 million was passed by CGMR BVI
to its wholly owned subsidiary China Global Mining Resources Limited (CGMR HK), a Hong Kong entity. CGMR HK then
completed the acquisition of two Chinese companies: Xiaonanshan Mining Co Limited (XNS) and Nanjing Sudan Mining Co
Limited (Sudan).
This note is set out in two parts. The first summarises the acquisition of XNS and Sudan from the perspective of CGMR BVI,
whilst the second part summarises how London Mining plc has accounted for this transaction at a consolidated level.
Acquisition of XNS and Sudan by CGMR BVI
Under the terms of the acquisition, the sellers, Mr Lu Benzhao and Ms Lu Tinglan, receive consideration of approximately
USD 42.25 million in cash (subject to post closing adjustments) in return for the sale of 100% of the equity of XNS and Sudan.
Of this consideration, USD 24.77 million has been paid and USD 17.48 million is deferred. Mr Lu Benzhao has been paid an
additional USD 10.21 million by CGMR BVI which is included in the cost of acquisition. He will also receive a further USD
38.64 million under a consulting agreement with CGMR BVI, payable subject to both continuing employment and available
cash of CGMR BVI, which will largely flow from the operations of the acquired entities: hence this amount has been excluded
from the cost of acquisition. Under the joint venture arrangements, London Mining will receive priority dividends from CGMR
BVI until its USD 44.5 million initial investment is repaid.
CGMR HK has also been granted the right to acquire a further iron ore mining company, Maanshan Zhaoyuan Mining Co Ltd
(Matang), which is owned by the sellers of XNS and Sudan.
From the perspective of CGMR BVI, the total cost of the acquisition was USD 58.6 million after taking into consideration
directly related transaction costs, management‟s best estimate of completion adjustments and certain liabilities assumed from
the other joint venture partner.
Accounting for CGMR BVI by London Mining
The Company has proportionately consolidated 50% of CGMR BVI from 23 April 2009. For accounting purposes the USD
38.7 million investment in CGMR BVI is treated as debt due from the joint venture of USD 34.9 million (discounted for the
timings of the anticipated cash inflows) and an equity contribution to the joint venture of USD 3.8 million (in exchange for the
Group‟s 50% interest). The Group‟s consolidated balance sheet at 31 December 2009 shows:
USD 5.75 million non-current „loan to joint venture partner‟ representing the interest-bearing loan to Wits Basin
(included in non-current loans and receivables note 10);
USD 17.85 million net non-current „loan to joint venture‟ representing the joint venture partner‟s 50% share of the
USD 35.7 million liability in CGMR BVI representing the original USD 34.9 million debt due, as noted above,
accreted for the period to 31 December 2009 for the timings of the anticipated cash inflows (included in non-current
loans and receivables note 10); and
USD 2.3 million net management fee receivable into the Group from the joint venture (included in non-current loans
and receivables note 10)
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
30
11. Investment by London Mining plc in the CGMR BVI joint venture (continued)
The unaudited provisional fair value of the net assets of CGMR BVI at the date of acquisition and the related net cash outflow
are shown below:
Book value
of assets
acquired by
CGMR BVI
100%
Provisional
fair value
adjustment
and
acquisition
entries
Provisional
CGMR BVI
fair value
100%
Provisional
CGMR BVI
fair value
50%
London
Mining
Fair value
adjustment
London
Mining
Total 50%
share
$’000 $’000 $’000 $’000 $’000
Net assets acquired
Mineral resources (a) - 59,428 59,428 29,714
5,008 34,722
Mining rights 2,935 - 2,935 1,468 - 1,468
Tangible assets (b) 7,605 11,224 18,829 9,415 - 9,415
Other non-current assets 917 - 917 459 - 459
Current assets 568 - 568 284 - 284
Completion balance sheet adjustments - - - - - -
Loan due to London Mining plc (1)
(c) - (34,994) (34,994) (17,497) - (17,497)
Deferred transaction costs payable by
joint venture (c) - (3,088) (3,088) (1,544) - (1,544)
Wits Basin liabilities assumed by CGMR
BVI (c) - (4,244) (4,244) (2,122) - (2,122)
Transaction costs recoverable from joint
venture - (1,600) (1,600) (800) - (800)
Deferred consideration to vendor (d) - (16,953) (16,953) (8,477) - (8,477)
Current liabilities (4,002) - (4,002) (2,001) - (2,001)
Provisions (e) - (2,747) (2,747) (1,374) - (1,374)
Deferred tax payable (a) (192) (14,857) (15,049) (7,525) (1,252) (8,777)
Net assets acquired 7,831 (7,831) - - 3,756 3,756
Satisfied by:
Equity contribution by London Mining plc 3,756
(1)
As there is a contractual obligation for London Mining to receive an amount equal to its initial investment in the CGMR BVI
as priority dividends, the cash paid by London Mining on the acquisition of its China investment is accounted for as a
debtor due from the joint venture and not a cost of investment. This loan is interest free and is expected to be repaid from
available profits within three years. It is therefore classified as non-current and has been discounted by applying the ten year
USA bond rate of 3.125%.
Provisional fair value adjustments
The fair values presented are provisional and will be finalised by 23 April 2010 as permitted by International Financial
Reporting Standards. The Provisional fair value adjustments made to the underlying book value of assets and liabilities
acquired by London Mining Plc in CGMR BVI as follows:
(a) The valuation of mineral reserves and resources purchased, grossed up for the respective deferred tax liability,
calculated at 25%, being the local rate in the People‟s Republic of China.
(b) A fair value increase to the book value of tangible assets acquired.
(c) All non-interest bearing long term financial liabilities or assets recognised on acquisition are discounted to net present
value to record their fair values at the date of acquisition. The discount is unwound until the expected repayment date
through net finance income.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
31
11. Investment by London Mining plc in the CGMR BVI joint venture (continued)
(d) The deferred consideration shown above is, at present, due for immediate payment and has therefore been included
within current liabilities in the Group‟s balance sheet. The joint venture is in discussions with the vendor to defer
payment in light of its plans to raise external finance prior to seeking a listing on the Hong Kong stock exchange. The
provisional fair value reflects the net present value of the anticipated cash outflows under the expected timing of
repayment. Its carrying value at 31 December 2009, after incorporating an unwinding of the discount factor for the
period since acquisition is USD 8.7 million.
(e) The recognition of a provision at the date of acquisition to cover restoration and rehabilitation costs were the mine to
be rehabilitated
The unaudited results for the year ended 31 December 2009 since acquisition includes:
Share of
joint venture (1)
London Mining plc
Total profit
attributable to
Chinese operations
Income statement $’000 $’000 $’000
Revenue 8,878 - 8,878
Cost of sales (2)
(4,318) - (4,318)
Administrative expenses (938) - (938)
Profit from operations, before London Mining management fee 3,622 - 3,622
London Mining management fee (2,025) 4,355 2,330
EBITDA 1,597 4,355 5,952
Depreciation (1,898) (161) (2,059)
Loss / profit from operations (301) 4,194 3,893
Net finance income (682) 751 69
Loss / profit before taxation (983) 4,945 3,962
Taxation (442) 40 (402)
Loss / profit since acquisition (1,425) 4,985 3,560
(1)
Group‟s 50% share since acquisition.
(2) Excluding depreciation
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
32
11. Investment by London Mining plc in the CGMR BVI joint venture (continued)
The unaudited results for the three months ended 31 December 2009 include:
Share of joint
venture (1)
London Mining
plc
Total profit
attributable to
Chinese operations
Income statement $’000 $’000 $’000
Revenue 2,945 - 2,945
Cost of sales (2)
(1,780) - (1,780)
Administrative expenses (147) - (147)
Profit from operations, before London Mining management fee 1,018 - 1,018
London Mining management fee (541) 1,387 846
EBITDA 477 1,387 1,864
Depreciation (826) (55) (881)
Loss / profit from operations (349) 1,332 983
Net finance income (271) 276 5
Loss / profit before taxation (620) 1,608 988
Taxation (397) 14 (383)
Loss / profit since acquisition (1,017) 1,622 605
(1) Group‟s 50% share since acquisition.
(2) Excluding depreciation
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
33
12. Notes to the cash flow statement
Unaudited
2009 2008
(a) Operating activities $’000 $‟000
Reconciliation of (loss) / profit for the year
to cash outflows from operating activities
(Loss) / profit for the year (34,395) 586,081
Adjusted for:
Profit for the year - discontinued operations - (669,091)
Share of results from associates 123 386
Impairment of investment in an associate 6,000 -
Depreciation 2,823 389
Finance income (2,893) (28,860)
Finance costs 2,171 74,669
Share-based payments expense 5,319 10,700
Tax expense 402 -
(20,450) (25,726)
Increase in non-current receivables (2,330) -
Increase in current receivables (535) (712)
Increase inventories (156) -
Increase in payables 3,710 2,521
Cash outflow from operating activities (19,761) (23,917)
(b) Investing activities
Payments to acquire intangible assets Additions of intangible assets (30,693) (10,045)
Less: transfers from debtors 118 -
Less: amounts accrued 5,804 -
Payments to acquire intangible assets (24,771) (10,045)
13. Related party transactions
At 31 December 2009 the Directors of the Group and their related parties, and entities in which they had a beneficial interest,
controlled 3.97% (2008: 15.9%) of the ordinary shares of the Company. The Group has a related party relationship with its subsidiaries, joint venture and its associates. Transactions between Group
entities are eliminated on consolidation and are not included in this note. During the year to 31 December 2009, a management fee of USD 4.4 million (2008: nil) of which the Group‟s share is USD 2.3
million was accrued from CGMR BVI to London Mining. At 31 December 2009, London Mining had advanced an amount of
USD 38.7 million to CGMR BVI, which will be recovered via priority dividends from available cash of the operations. The
Group‟s share of this balance, which, for reasons outlined in note 11, is recorded on consolidation as a loan at its estimated fair
value, of USD 17.9 million. London Mining has also recognised an amount due of USD 1.5 million which relates to
consultancy costs and legal fees recoverable from the joint venture.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
34
13. Related party transactions (continued)
The Group continues to hold a 20% investment in International Coal Company Limited (ICC). G Hossie, the Chief Executive
Officer of London Mining plc has a beneficial interest of 12% in ICC. As a consequence of this interest, Mr Hossie does not
represent London Mining on the ICC board and does not participate in any decisions of the London Mining board in relation to
ICC. On 27 November 2009, a convertible loan of USD 1.0 million was issued by London Mining plc to ICC. This loan bears
interest at a rate of 8% per annum and is repayable on the earlier of: (i) 27 November 2011; (ii) a change of control of ICC.
The loan can be converted on any date after 27 November 2010, and will be converted at a price where US$1m equals 3% of
the fully diluted share capital of ICC.
14. Contingent liabilities
As part of the disposal of the Brazilian operations, London Mining granted certain warranties and indemnities to the purchaser,
ArcelorMittal. Having taken appropriate legal advice, the Group believes the likelihood of a material liability arising is remote.
As part of the acquisition of its Chinese joint venture described in note 11, the vendor has an entitlement to receive further
consideration of up to USD 38.6 million under consulting agreements payable subject to continuing employment for up to 8
years and available cash in CGMR after the priority repayment of the Group‟s USD 44.5 million initial investment and
subsequent ongoing distribution rights. The Group has not recognised any provision for the year ended 31 December 2009
based on the Directors current expectation that the likelihood of the vendor being entitled to a material balance is remote.
15. Capital commitments
Unaudited
2009
2008
$’000 $‟000
Commitments for the acquisition of intangible assets 1,561 -
Commitments for the acquisition of property, plant and equipment 53 -
Total 1,614
-
The Group‟s share of the capital commitments of its jointly controlled operations is USD nil.
16. Share capital
Share capital at 31 December 2009 is USD 109,583,795. During the three months ended 31 December 2009 the Group issued the
following:
- 50,000 shares following the conversion of share options.
London Mining plc Notes to the condensed consolidated financial statements (continued)
For the year ended 31 December 2009
35
17. Events after the balance sheet date
Delta Mining Consolidated
On 8 August 2008, London Mining through its wholly-owned subsidiary, Rannerdale, announced that it had agreed to take an
initial 39.3% interest in DMC Coal, a company in which parent company DMC Consolidated SA (DMC) has a 30.35% interest,
for a total consideration of USD 16.5m. London Mining also issued a USD 18.5m loan to DMC Energy, a subsidiary of DMC.
DMC is the holding company for all the DMC group‟s coal and iron ore assets and prospects in Africa, which include:
Rietkuil coal project, Springbok Flats coal project, and Limpopo coal project, all in South Africa and various coal prospecting
and exploration rights in Botswana and Swaziland.
On 13 January 2010, London Mining converted both the loan and its net equity investment in DMC Coal into 28% of the issued
share capital of DMC, on a fully diluted basis.
18. Composition of the Group
Ownership interest
31 December 31 December
Country of 2009 2008
incorporation Principal activity % %
Subsidiaries:
London Mining Company Limited Sierra Leone Mining 100 100
London Mining Logistics Company
Limited
Sierra Leone Dormant 100 100
Anglo Mexican Mining Ltd British Virgin Islands Investment holding
company 55 55
Compania Minera Suizo-Mexicana, SA
de CV Ltd
Mexico Mining 54 54
MIL Participacoes Societarias Ltda Brazil Administrative company 100 100
Rannerdale Limited Isle of Man Investment holding
company 100 100
Torbanite One Limited Isle of Man Investment holding
company 100 100
London Mining Greenland A/S Greenland Mining 100 100
Associates:
DMC Coal Mining (Pty) Ltd South Africa Mining 39.3 39.3
International Coal Company Ltd Cayman Islands Mining 20.0 20.0
Joint Ventures:
China Global Mining Resources (BVI)
Limited
British Virgin Islands Investment holding
company 50 -
China Global Mining Resources
Limited
Hong Kong Investment holding
company 50 -
Xiaonanshan Mining Co Limited People‟s Republic of
China
Mining 50 -
Nanjing Sudan Mining Co Limited People‟s Republic of
China
Mining 50 -
Saudi London Iron Limited Saudi Arabia Mining 50 -
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